24/09/2021

THAILAND DAILY

NEWSPAPER / MAGAZINE / PUBLISHER

china’s-xiaomi-logs-record-profit-but-flags-chip-crunch-risk

China’s Xiaomi logs record profit but flags chip crunch risk

TAIPEI — Chinese smartphone maker Xiaomi on Wednesday reported record profit for the April-June quarter as the world’s second-largest smartphone maker snapped up market share lost by domestic rival Huawei due to a U.S. crackdown.

Xiaomi’s quarterly revenue grew 64% on the year to 87.79 billion yuan ($13.55 billion), while net profit jumped 84% year-on-year to 8.26 billion yuan. The smartphone maker warned, however, that the ongoing global chip shortage poses a challenge to it and “all electronics makers” this year.

“We think we have a very good chance to achieve global No. 1 in three years based on what we achieved in terms of market share last quarter,” Wang Xiang, Xiaomi’s president, told reporters on Wednesday. “We still see massive growth opportunities across Europe, Asia and Africa as well as in our domestic market.”

Wang also flagged uncertainties for the company’s business for the next two quarters. “The current and ongoing chip shortage will be the most critical challenge for all electronics makers for the second half of 2021.”

Samsung and Apple, Xiaomi’s two key rivals in the smartphone market, are suffering from the unprecedented global chip crunch. Apple said it expects the chip shortage may worsen this quarter and could cause an impact of $3 billion to $4 billion in the July-September period.

Xiaomi meanwhile has geared up aggressively and asked suppliers to prepare components for up to 240 million smartphones for 2021, Nikkei reported earlier. When it unveiled its latest high-end handset, the Mix 4, earlier this month, the Chinese company said it aims to surpass Samsung Electronics as the world’s biggest smartphone maker in three years.

Xiaomi overtook Apple as the second-largest handset maker in the April-June period, with 17% of the global market, just slightly behind Samsung’s 18%, research company Canalys said. Its shipments of 52.8 million units were up 83% from a year ago.

Quarterly revenue from overseas markets was the highest ever — 43.6 billion yuan, up more than 81% on the year. Overseas sales contributed almost half of Xiaomi’s total revenue.

Wang said Xiaomi reached the No.1 position in Europe for the first time in the April-to-June quarter, and was the biggest smartphone maker in middle and eastern Europe for the third consecutive quarter.

Xiaomi on Wednesday also announced it will spend $77 million to acquire Deepmotion Tech, an autonomous driving software developer, as it accelerate its development electric vehicles. Xiaomi has said it will spend $10 billion in the next 10 years on its EV business.

Its impressive growth in terms of market share and profit makes it the biggest apparent winner from the fall of Chinese peer Huawei.

Analysts say Xiaomi has grabbed significant market share from Huawei both at home and abroad.

Huawei was briefly the world’s biggest maker in 2020, but its global market share is now just 4% following a series of trade restrictions imposed by Washington, which cited national security concerns for the moves.

“In Western Europe, only three years ago in 2018, Xiaomi had slightly more than a 2% share, but it already grew to 9% last year and 14% in the first half of 2021,” IDC analyst Joey Yen told Nikkei Asia. “In Eastern Europe and Russia, Xiaomi is already No. 1 in the past April-June period, and it maintains a strong position in Asia.”

Yen said Huawei’s fall contributed to Xiaomi’s quick rise over the past year and also proves that Xiaomi’s strategy of introducing a wide portfolio of products, from budget to high-end phones, has been successful.

“Xiaomi unveiled the high-end phones to boost its brand image, while it also relies on those cost-effective phones that it collaborates [on] with telecom operators to bolster sales volumes,” the analyst said.

However, it faces competition as it aims to further increase its market share, analysts said.

Archie Zhang, an analyst with Counterpoint Research, said it will be challenging for Xiaomi to cement its No. 2 position.

“Xiaomi’s rise in Europe and Latin America in Q2 2021 was against the backdrop of the supply shortage of Samsung, which deploys most of its production capacity in Vietnam, where production was disrupted by the COVID-19 situation,” Zhang said. “Once the country’s pandemic is under control, Samsung’s shipment and market share should witness rebounds globally.”

Additional reporting by Lauly Li in Taipei

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